Factoring and invoice discounting in 2014

2014 has been another difficult year for the factoring industry showing very little growth in terms of client numbers with the 6,669 new clients taken on in the first nine months of the year being almost completely negated by the 6,397 lost in the same period.

The statistics provided by ABFA show that the 43,708 companies using factoring and invoice discounting as at 30th September 2014 were using £19.3 billion of funding which was an increase of 12% on the previous year’s funding levels.

The trouble is that we don’t know the reasons behind the increase in funding levels. It would be good to think that the companies needed higher levels of funding as they were selling more but it is equally possible that companies that were not fully utilizing their facilities in previous years had upped their cash requirements due to poor trading

82% of the total client numbers are companies turning over £5m or less and their numbers actually declined by 109 companies but the remaining 35,600 companies in this sector increased their funding levels over the previous year but as always the figures are skewed by the inclusion of the 700 companies turning over in excess of £50m pa meaning that 1.7% of the total number of companies were responsible for 39.9% of the total funding thus making many of the overall statistics meaningless.

Leaving published statistics aside almost all factoring insiders are complaining about the lack of activity in the market and have done so for most of the year with most of the factoring companies and brokers feeling the pinch.

Against this backdrop we have seen yet more factoring companies setting up with Richard Pepler launching HH Cashflow Finance as part of the Henry Howard Finance Group, Arbuthnot have either launched or are about to launch a new factoring subsidiary of their Secure Trust Bank subsidiary and there is at least one senior factoring executive doing something under the radar although I haven’t heard any rumours yet.

2014 has probably been the year when alternative forms of invoice finance began to take more of a hold – at least in the public’s imagination if not in hardcore lending. The market leaders are those masters of self promotion Market Invoice whilst rumours abound that one of their competitors are finding life difficult and I must admit that I watch this market sector carefully as I am very dubious about any form of invoice finance that takes place without debentures, personal guarantees or most importantly, due diligence

From a more personal point of view Factoring Solutions haven’t managed to buck the trend and we have seen a reduction of about one third in the number of enquiries received throughout year although the conversion rate has been higher so the net number of companies taken on will end up similar to last year which is a positive sign.

I apologize that the updates have been somewhat scarce this year but in all honesty there hasn’t been that much to write about and although there are interesting things going on in the background much of what I am told is in confidence and therefore cannot be published.

May I finish by wishing Seasons Greetings to all readers of this blog and hope that we all have a prosperous New Year